Forget Texas's red-neck image. Peter Watts explores the state capital, Austin, and discovers a thriving music and film scene

As the fiddle and steel guitar kick in, Willie Nelson spins past. In the background, Elvis asks a tigress to dance, while two cowgirls do more for the wearing of chaps than John Wayne and his ilk ever could. Welcome to Austin and a fancy-dress party, Texas country style.

As the fiddle and steel guitar kick in, Willie Nelson spins past. In the background, Elvis asks a tigress to dance, while two cowgirls do more for the wearing of chaps than John Wayne and his ilk ever could. Welcome to Austin and a fancy-dress party, Texas country style.

But first, let's have some introductions. Austin, the state capital, deep in the heart of Texas, is a city where you have to abandon preconceptions. So you think Texas is full of redneck hicks and reactionary George Bush clones obsessed with oil and money? You think country music is all about tears in your beer, while some old gal belts out bad covers of Dolly Parton and Garth Brooks songs? Think again. Thanks to a large student population and thriving music and film scenes, Austin is one of the coolest, most laid-back capitals you will ever visit. It's no coincidence that Richard Linklater, the cult film director, set Slackers here. And the live music is exceptional. Locals might moan that Austin isn't what it was, but they don't know how lucky they are. In 10 days I saw some 30 bands of every variety, with artists playing for the love of it, rather than an industrial desire to shift units. The difference is discernible, the result invigorating.

Take a room at the Austin Motel, a funky little place on the brow of a hill south of the city centre, recognised all round town for its landmark sign, beckoning tourists with the boast "So close, yet so far out" and, on the reverse, "No additives, no preservatives, corporate free since 1938". People here are friendly; rooms are cheap and decked out with some cracking retro furniture and whole days can be whiled away around the original 1950s kidney-shaped pool. It's also in the middle of Austin's most interesting strip, South Congress, a hive of secondhand clothes and record shops (Lucy in Disguise with Diamonds is a good vintage clothing source), Tex-Mex restaurants (El Sol y la Luna) and the Continental Club, the best music venue in town. During our visit, the place buzzed with the South Congress street party, held on the first Thursday of each month, with free food and drinks, store discounts and live bands. Austin is full of secrets such as this, and another is next to the motel: the parking lot behind Jo's coffee shack has weekly free live music and film screenings.

The town centre is a longish walk north over the Congress Bridge – whose nooks and crannies are home to 1.5 million Mexican free-tail bats – at dusk, between May and October, they fly down river hunting for insects. Or you can take a ride on one of the free dillos (short for armadillos) that serve the downtown area. Austin's public transport is exceptional. Dillos are plentiful, and if you need to go further afield, regular buses cost 50 cents (35p) for round trips. Austin is also, rarely for an American city, pedestrian-friendly, though if you're walking more than four blocks, you'll soon find you have the pavement to yourself. In a place as safe and clean as this, walking is a treat.

There's not a great deal to do in the centre during the day. After you've visited the LBJ Library, the Austin Museum of Art, the shops and cafés around the university on Guadeloupe Street (where you can pick up shirts and a tux for $10) and the University of Texas Tower (from which a lone nut began sniping at passers by in 1966, killing 14 people and wounding dozens more), you'll have exhausted its sights. Austin, though, is called the town within a park and the lush, green surrounding hills, parks and lakes are a delight. Hire a car and drive to Hippie Hollow on Lake Travis, whose quaint name, we discovered, is due to it being Austin's only clothing-optional beach. If that doesn't grab you, try the views from Mount Bonnell, the local vantage point, or Barton Springs, which stays at 21C (70F) year round and is a great spot to have a picnic and chill out – this time keeping your clothes on.

It's at night that Austin, "the live music capital of the world", comes into its own. Avoid the frat-boy bars of Sixth Street and head for Ruta Maya, the oh-so-liberal coffee shop on Fourth Street (poetry readings are a blast), to pick up a copy of the Austin Chronicle, the free weekly listings guide. Around 250 bands are on offer, from gin joint honky-tonk to West Coast surf; ska-reggae stylings to travelling rock monolith at the arena. You can't go far wrong with what the Chronicle recommends, but a couple of places should be checked out regardless: rock bands at Antone's or Emos or Ego's; the Hole in the Wall; Joe's Generic Blues Bar; Stubb's BBQ for Sunday's gospel brunch and the Saxon Pub, where former Faces keyboardist Ian McLagen has a residency. The Continental Club has something fantastic every night – don't miss Redd Volkaert's Saturday matinee.

But ever since Willie Nelson and Waylon Jennings (who died last week) moved here in the 1970s, it's the country music scene for which Austin has been famous. The traditional Texas dancing halls of the Broken Spoke and Ginny's Little Longhorn are incredible, especially when local legend Dale Watson is playing and the cowboys are kicking up a storm. As one of the Weary Boys, an up-and-coming country band, told me: "You might laugh at a big Texan cowboy doing the waltz, but he'll take you outside, beat hell out of you, then go back in and finish his dance." This is the real Texas, and as hospitable a bunch of people you could hope to meet. Grab a partner and a bottle of Lone Star, and go. You might even bump into Willie.

The Facts

Getting there

Return flights to Austin cost from £350 with Continental Airways (0800 776464; or £360 with Delta (0800 414767;

Being there

The Austin Motel is at 1220 South Congress (001 512 441 1157; Rooms start from $50 (£33) to $106 for a poolside luxury double.

Car hire is available through Enterprise at 319 South Lamar (001 512 472 1373) for about $45 a day.

Further information

Avoid South by Southwest in March, the music industry's annual descent on Austin. Otherwise, late spring and autumn are the best times to visit, but even in early November the temperature was 80F.

Austin Convention and Visitor Bureau (001 512 474 5171; partners/acvb/).